Heavy January supply is affecting investor appetite for new paper, according to bankers, after four new issues today (Wednesday) met modest demand, though deals from Santander, Deutsche, BayernLB and RLB Steiermark were deemed reasonable given challenging conditions.

With four issuers in the market selling a combined Eu2.5bn of euro benchmark supply, issuance so far this month hit Eu17.25bn, compared with Eu18.75bn in the whole of January last year.

“All of today’s deals have made it and look reasonable, but none are a runaway success,” said a syndicate official “There is already some fatigue in the market, as we have seen a lot of supply, and the market could do with a break.”

Another syndicate official agreed.

“The market feels heavy,” he said. “In each of these issues subscription levels versus deal sizes look modest, and you would assume decent ECB participation in each.

“Given that, the market doesn’t feel so stellar, to be honest.”

The two Spanish issues came after Bankia launched the first peripheral euro benchmark covered bond of the year yesterday (Tuesday), attracting orders of over Eu1.1bn for a Eu1bn five year cédulas.

Santander leads Mediobanca, Natixis, Nomura and Santander priced the Spanish bank’s 10 year cédulas at 65bp over mid-swaps, in the middle of guidance, setting the size at Eu1bn on the back of Eu1.25bn of orders.

“It’s quite a good outcome on a busy day with competing supply,” said a syndicate official at one of the leads.

Syndicate officials at and away from the leads said the deal paid a new issue premium of around 15bp – with Santander September 2022s at 35bp, mid – while coming around 30bp inside the Spanish sovereign.

After announcing a mandate yesterday afternoon, Deutsche Bank SAE sold its second benchmark cédulas today. The Spanish issuer made its debut with a Eu1bn five year issue on 17 November.

Leads Banca IMI, BBVA, Crédit Agricole, Deutsche and ING launched the seven year cédulas hipotecarias with initial price thoughts of the mid-to-low 70s over mid-swaps, before moving to guidance of 70bp-72bp, will price within range, on the back of Eu750m of orders. The deal was then re-offered at 70bp and the size set at Eu500m.

Syndicate officials at and away from the leads saw fair value for the new issue at around 60bp, seeing Deutsche November 2020s at 49bp, mid, and 2021-2023 paper from BBVA and Santander trading at 36bp-40bp.

BayernLB leads BayernLB, Crédit Agricole, DZ and NordLB launched the German bank’s Eu500m no-grow 10 year public sector Pfandbrief with guidance of the flat to mid-swaps area, before re-offering the deal at 1bp through on the back of books over Eu700m. The book closed at Eu750m, pre-reconciliation.

“It might not look exuberant, but is a decent result, especially given the current market sentiment,” said a syndicate official at one of the leads.

Syndicate officials at and away from the leads said fair value for the new issue was around minus 5bp, seeing BayernLB September 2025s at minus 7bp, mid, and also citing September 2025 paper from LBBW and Commerzbank at minus 7bp and MünchenerHyp March 2025s at minus 9bp.

Central banks were allocated 34% of the deal, asset managers and pension funds 27%, Landesbanks and savings banks 26%, banks 11%, and insurance companies 2%. All of the deal went to German accounts.

Today’s 10 year issuance from BayernLB and Santander followed a 15 year tranche of Caffil issue on Tuesday of last week and a 10 year for ABN Amro last Thursday, which were seen as finding demand limited because of their maturities.

Bankers had noted that three to five year deals had attracted the strongest demand since the market reopened last week, and while seven year issuance from Erste and Deutsche Pfandbriefbank was deemed encouraging yesterday, syndicate officials said deals further out the curve would remain challenging.

A syndicate official at one of BayernLB’s leads said takeaways are limited from the Eu500m no-grow Pfandbrief, but said the maturity was still difficult given potential volatility.

“I am still not 100% convinced about the virtue of doing 10 years,” he said. “This one worked, of course, but with the potential for moves in rates further out the curve, it can be a bit of a gamble.

“The universe for 10 year paper is still somewhat limited, so you are either lucky and find those one or two bids that push you over the line, or you aren’t and you don’t. I would not recommend these deals to all.”

Raiffeisen-Landesbank Steiermark launched its first benchmark covered bond since June 2013 today, after holding a European roadshow in November.

The deal came after the Eu750m seven year Pfandbrief for Erste yesterday that was the first Austrian issue of the year. Syndicate officials said Erste’s issue showed that investors were comfortable with Austrian paper in spite of concerns over the jurisdiction, after the deal was priced at 16bp from initial guidance of the 20bp area and attracted Eu1.4bn of orders from almost 90 accounts.

RLB Steiermark leads BayernLB, Commerzbank, Crédit Agricole, Erste and RBI launched today’s Eu500m no-grow seven year mortgage-backed covered bond with initial price thoughts of the low-to-mid 20s over mid-swaps. The leads then moved to guidance of the 22bp area on the back of over Eu500m of orders, before fixing the spread at 21bp.

“It is a solid result, given the rather shaky and spread-demanding sentiment in the market,” said a syndicate official at one of the leads. “It is not the biggest order book but it is good quality, and the pick-up RLB paid is in line with what we have seen in recent deals.”

Syndicate officials noted that RLB Steiermark has only one benchmark outstanding, June 2028s quoted at 13bp. They said a more appropriate comparable is Erste’s new issue, which was seen trading at around re-offer today.

A syndicate official away from the deal suggested the more modest interest in RLB Steiermark’s issue compared with Erste’s showed market sentiment to have weakened since yesterday, whereas another suggested that some investors might be more cautious of deals from the Raiffeisen sector than from other Austrian issuers.

Some syndicate officials suggested that the pace of supply could slow tomorrow (Thursday) as some issuers may be discouraged by the apparently weaker market sentiment.

“I am sure we will still see one or two move forward, but I think people are realising that exercises are becoming more uphill-ish,” said one.

Another syndicate official said, however, that heavy supply could continue.

“It depends on what issuers want to do,” he said. “You can certainly get a deal through this week, but it won’t be the best deal anyone’s ever done.

“Some of the more sophisticated issuers might look at this market and decide to wait until the splurge is over, and if you’ve only got one or two deals to do this year, you’re not going to be in a rush to jump in.”